National Foundation For Special Needs Integrity, Inc. v. Reese

United States District Court, S.D. Indiana, Indianapolis Division

October 26, 2016

NATIONAL FOUNDATION FOR SPECIAL NEEDS INTEGRITY, INC., Plaintiff/Counter Defendant,v.DEVON C. REESE, as the Personal Representative for THE ESTATE OF THERESA A. GIVENS, deceased, Defendant/Counterclaimant.

ENTRY ON CROSS MOTIONS FOR SUMMARY JUDGMENT AND
MOTION FOR LEAVE TO FILE SUR-REPLY

TANYA
WALTON PRATT JUDGE

Pending
before the Court are three motions: a Motion for Summary
Judgment filed pursuant to Federal Rule of Civil Procedure 56
by Plaintiff National Foundation for Special Needs Integrity,
Inc. (“National Foundation”) (Filing No.
54), a Cross Motion for Summary Judgment filed pursuant
to Federal Rule of Civil Procedure 56 by Defendant Devon
Reese, as Personal Representative of the Estate of Theresa
Givens (“Reese”) (Filing No. 66), and a
Motion for Leave to File a Sur-Reply filed by National
Foundation (Filing No. 74). For the following
reasons, the Court GRANTS in part and DENIES in part National
Foundation's Motion for Summary Judgment, DENIES
Reese's Motion for Summary Judgment, and DENIES National
Foundation's Motion for Leave to File Sur-Reply.

I.
BACKGROUND

National
Foundation is a not-for-profit corporation whose purpose is
to act as trustee to pooled special needs trusts. A special
needs trust is a trust created for the benefit of a
beneficiary with a disability who is receiving means-tested
governmental benefits, such as Supplemental Security Income
or Medicaid. A special needs trust protects a disabled
person's eligibility for current or future public
benefits while simultaneously allowing the person with
disabilities access to additional funds to pay for expenses
not covered by public benefits. The trust property of
numerous trust beneficiaries (called “members”)
is “pooled” for the purpose of custody,
management, and investment in accordance with 42 U.S.C.
§1396(d)(4)(C). A separate “sub-account” is
established and administered for the sole benefit of each
specific trust member. At the time of a pooled trust
member's death, the funds remaining in the deceased
member's sub-account must be used to pay back Medicaid,
and if funds still remain after repayment, the funds either:
(a) remain in the pooled trust for the benefit of the other
pooled trust members, or (b) can be distributed to others
pursuant to the beneficiary's wishes that are clearly
stated in the trust documents.

Theresa
Givens (“Givens”) was a forty-nine year old,
unmarried mother of three adult children, who was severely
injured in 2009 by the medical use of Gladolium dye.
(Filing No. 69 at 2.) Givens filed a products
liability lawsuit and was represented by Brown & Crouppen
law firm. The suit resulted in Givens receiving $254, 847.76
in net settlement proceeds. Prior to receiving the
settlement, Givens' attorneys at Brown & Crouppen,
gave her the name of both National Foundation and Midwest
Special Needs Trust to discuss distribution her settlement
benefit. (Filing No. 64-4 at 2.)

On or
about June 1, 2011, Givens contacted Shane Service
(“Service”), National Foundation's
then-general counsel, and informed Service that she had six
goals for her settlement funds. (Filing No. 64-5 at
1.) Givens advised Service that she wished to use her
settlement funds to purchase: 1) a primary residence; 2) a
home for her son; 3) an income-producing storefront property;
4) two cars; 5) a vacation; 6) and saving bonds of an
undisclosed amount for her three children and all of her
grandchildren. Id. Givens also informed Service that
she wanted to purchase an annuity with the left over proceeds
and to live off the interest. Id.

After
speaking with Givens, Service emailed Andee McGaughey
(“McGaughey”), the paralegal at Brown &
Crouppen, who was assigned to Givens' case. Id.
In the email, Service reminded McGaughey that a special needs
trust is subject to the sole benefit rule and cannot be used
for the primary benefit of anyone other than the beneficiary.
Id. at 2. Service informed Givens that, given her
stated goals, a special need trust might not be the proper
vehicle for her because it would not allow Givens to purchase
housing for her family members, give gifts to her children
and grandchildren, and would only allow her to purchase one
vehicle. Id.

On July
11, 2011, Givens met with her attorneys at Brown &
Crouppen who advised that the settlement funds needed to be
placed in the trust so that Givens would not lose her public
health benefits. (Filing No. 64-6.) On July 20,
2011, despite the advice of counsel regarding the risk of
losing her needs based government benefits, Givens instructed
Brown & Crouppen to place only $184, 000.00 in a special
needs trust and distribute the remaining portion by check
made payable to her. (Filing No. 64-7.) Givens
informed her attorneys that she intended to use the funds
that were not placed in the trust to pay off her debts, open
a bank account, buy a car for her daughter, and give $50,
000.00 to her son. (Filing No. 64-11 at 36;Filing No. 24-1.) Eight days later, on July 28,
2011, Givens then instructed Brown & Crouppen to place
her entire settlement into a special needs trust. (Filing
No. 64-8.) McGaughey testified that, on that same day,
Givens informed McGaughey that she was frustrated with her
children because she felt that she was being pressured by
them to give them her settlement funds. (Filing No. 64-11
at 7-8.) Givens also told McGaughey that she was afraid
her children would take the money, she would be left without
anything and that she could have everything taken away from
her. Id.

On
August 9, 2011, Givens executed a Joinder agreement, thereby
joining the pooled trust operated by National Foundation.
(Filing No. 55;Filing No. 69 at 3.)
McGaughey signed the document as a witness. Although Brown
& Crouppen was her legal counsel, at the time she
completed the Joinder agreement an attorney was not present.
Givens listed herself as the only
“contingent/remainder/residual” beneficiary.
Id. The pertinent provisions in the Joinder
Agreement state as follow:

IV. DISTRIBUTIONS UPON THE DEATH OF THE
BENEFICIARY

Amounts remaining in the trust upon the death of the
Beneficiary shall be distributed in accordance with
§13611(b) of the Omnibus Budget Reconciliation Act of
1993 (OBRA), Public Law 103-66, codified at 42 U.S.C.
§1396p(d)(4)(C). Accordingly, to the extent that amounts
remaining in the beneficiary's account upon the death of
the Beneficiary are not retained by the trust, the trust
shall pay to the state of Missouri such remaining amounts in
the account an amount equal to the total amount of medical
assistance paid on behalf of the Beneficiary under the State
of Missouri's Medicaid plan.

Except in the event that this Article Fourteen may be in the
future amended to effectuate the letter, spirit and purpose
of 42 U.S.C. §1396p(d)(4)(C)(iv), the National
Foundation for Special Needs Integrity, Inc. shall not retain
any portion of the Beneficiary's trust Sub-Account upon
his or her death. Rather, all such amounts shall be
reimbursed to the state of Missouri, by and through the
Missouri Department of Health and Family Services, up to the
full amount that it has expended on the Beneficiary, both
before and after the creation of this trust. If any money
remains after the state of Missouri has been reimbursed in
full, said money shall be distributed in accordance with
Section V, below.

If no secondary Contingent/Residual/Remainder Beneficiaries
survive or if none are named in Section V below, then and
only then shall said money remain with the trust. * * * If
any amounts remain after the state of Missouri (and any other
state that may receive proportionate reimbursement pursuant
to Section 14.2 of the accompanying Declaration of Trust) has
been reimbursed in full, as described above, the remaining
amounts shall be distributed in accordance with the Joinder
Agreement under which the Beneficiary has enrolled in the
pooled trust.

(Filing No. 1-2 at 13).

V.
CONTINGENT/REMAINDER/RESIDUAL BENEFICIARIES

Please
tell us below to whom you would like us to pay out the
Remainder of your Sub-Account should there be any money left
after the state of Missouri has been reimbursed for the
Medicaid services it has rendered to you during your
lifetime. This person can be an individual person, such
as a family member; or an organization, such as a favorite
church or charity. YOU MUST NAME AN ACTUAL PERSON OR
ENTITY. DO NOT WRITE VAGUE DESCRIPTIONS OF CLASSES OF PESONS,
SUCH AS “MY HEIRS AT LAW, ” OR “MY
ISSUE” OR “A YET TO BE IDENTIFIED CHARTIABLE
ORGANIZATION.”

Contingent/Remainder/Residual
Beneficiary #1:

Name: Theresa Givens

Address: 1723 Cochran PlaceSt. Louis, MO
63106

Telephone Number (Include Area Code): 314-484-2558

Percentage: 100%

If you name more than one Contingent/Remainder/Residual
Beneficiary, please check to make sure the percentages add up
to 100%.

Any Remainder shares for a Contingent/Remainder/Residual
Beneficiary named in this section who does not survive the
Beneficiary will lapse and be distributed in equal shares to
all other named Contingent/Remainder/Residual Beneficiaries.

Id. at 14. On October 10, 2011, Givens deposited
approximately $250, 000.00 into her trust sub-account.
(Filing No. 69 at 2.) Sadly, on November 19, 2011,
just a few weeks after funding the trust, Givens died
intestate. Id. at 1. As a result, at the time of her
death, approximately $235, 000.00 was left in her trust
sub-account, with no repayment being due to Medicaid.
Id. at 4, 6.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On or
about November 23, 2011, Givens&#39; personal injury
attorneys at Brown & Crouppen spoke with Service
regarding distribution of the remaining trust funds to
Givens&#39; adult children. (Id. at 4-5; Filing
No. 69-10.) At that time, National Foundation informed
Givens&#39; attorneys that Givens had designated herself as
the remainder beneficiary. Id. As a result, National
Foundation stated that it would not distribute the funds to
Givens' adult children but would, instead, retain the
funds in ...

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